₹1 Banknotes to Make Comeback in India

[Bimat]

After 20 years, ₹1 paper notes to make a comeback

SHISHIR SINHA

NEW DELHI, DECEMBER 25: 

One rupee may not buy you much today, yet the Government is keen to start printing ₹1 notes after a gap of almost two decades.

The Government has notified 'Printing of One Rupee Currency Notes Rules, 2015', which will come into effect from January 1, 2015. Due to higher cost and for freeing capacity to print higher denomination notes, printing ₹1 note was discontinued in November 1994, followed by ₹2 in February 1995, and ₹5 in November 1995. Since then, only coins have been issued for these denominations. However, old notes are still in circulation and remain legal tender.

As before, the new one rupee note will have the signature of the Finance Secretary. Apart from the one rupee note, all other paper currency (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹500 and ₹1,000) have the signature of the RBI Governor, as these are issued by the Reserve Bank of India, whereas ₹1 is issued by the Government of India.

The new ₹1 note will be different in terms of colour, too. It will be predominantly pink and green. Earlier, the ₹1 currency note had a predominantly indigo colour. Also, the new note will have 'Bharat Sarkar' on its masthead, with 'Government of India' printed below that. All other currencies have 'Bhartiya Reserve Bank' and 'Reserve Bank of India' printed on them. While the notification does not give any reason for resuming the printing of ₹1 notes, it is believed that reports of coin shortage and the rising incidence of melting coins might have prompted the move. The notification does not mention how many notes will be printed and issued.

In the last year of its printing, 44 million pieces of ₹1 notes were issued. Despite the RBI's appeal to change these notes for coins, these are still in circulation. However, there is no current estimate of such notes in circulation.

According to the last official number in RBI's Annual Report for the year ended June 2002, a total of 3,076 million pieces of ₹1 notes (value ₹308 crore) were in circulation at the end of March 2002.

Source: The Hindu

[Bimat]

Strictly speaking, this is a foolish decision. Even the ₹10 banknotes have little value these days. Makes no sense at-all to reintroduce the ₹1 banknotes after 2 decades!

Aditya

[asm]

Read a comment of Fb that the notes with the signature of Arvind Mayaram were already printed before the Finance Secretary was changed. Hence the printed notes have not been put into circulation.

AMit

[Bimat]

Just read that the new ₹1 banknotes will have signature of Rajiv Maharshi who is the current finance secretary...

Aditya

[Bimat]

Read a comment of Fb that the notes with the signature of Arvind Mayaram were already printed before the Finance Secretary was changed. Hence the printed notes have not been put into circulation.

Wouldn't be surprised if some dealers get hold of those un-issued banknotes and make some money out of it...

Aditya

[Enlil]

Well if issuing only banknotes works well for Laos, DR Congo, etc then why not India. It is probably a remedy for small coinage shortage I have heard about in India. But it would be better to reduce the coin sizes and issue higher denominations.

[Pabitra]

Wouldn't be surprised if some dealers get hold of those un-issued banknotes and make some money out of it...

More than dealers, it is officials in security printing press and RBI, who will stand to gain.

Well if issuing only banknotes works well for Laos, DR Congo, etc then why not India. It is probably a remedy for small coinage shortage I have heard about in India. But it would be better to reduce the coin sizes and issue higher denominations.

It does work for countries who do not have mint, to rely on notes alone. By sheer economic sense, smaller denominations must be coins since they can withstand wear and tear better than paper or polymer notes.
You could add many other countries like Bhutan, Vietnam, Mongolia, Moldova, Myanmar etc. to that list.
Countries stopping some coins and replacing their coins with notes will include Nepal, Pakistan,  Malaysia, Oman etc.

Redesign of coins is in progress as indicated by RBI in their latest annual report on page 136.
Issue of higher denominations is a sensitive issue since it is tacit admission of inflation gone out of control. However, Rupees Twenty note seem to have been stopped for some time and coin issue appears to be only a matter of time, as far as India is concerned.

[augsburger]

China also has banknotes for most of the population, down to notes that are almost worthless. I collected so many and gave them to the blind guy who plays a traditional instrument while being herded through town by his wife. Only the east coast between Beijing and south of Shanghai really use coins.

[Bimat]

Apparently, ₹1 banknotes are not making any comeback. I was told (by many dealers / collectors) yesterday that this is a rumor being spread by someone in Finance Ministry. One guy even had a theory that the news has been planted by someone who wants the market of old ₹1 banknote bundles to crash.

Aditya

[dheer]

Well if its in newspaper, then either there is some credibility to it or someone highly placed is putting some false rumors

[Bimat]

RBI to bring back Re 1 note printed by govt

TNN | Feb 14, 2015, 01.22AM IST

MUMBAI: One-rupee currency notes, which the government had ceased printing in 1994, will soon be back in circulation. The RBI has said that it will soon make available notes of one rupee denomination — pink-green in colour — with the image of the oil exploration rig Sagar Samrat. Unlike other currency notes, which are printed by an arm of the RBI, the one-rupee note was always printed by the government as a substitute for the rupee coin under the Coinage Act. The move to issue one-rupee currency notes, despite the RBI ceasing printing of higher denomination notes of Rs 2 and Rs 5, appears to be a fallout of a clash of wills between the government and the central bank.

The RBI had earlier informed the government that with the repeal of Section 2 of the Currency Ordinance, the government no longer had the power to issue one-rupee notes. The government then sought an opinion from the law ministry which opined that the Coinage Act of 2011 did not bar the government from printing one-rupee notes.

In a statement issued here, the central bank said, "RBI will soon put in circulation currency notes in one-rupee denomination. The notes will be printed by the Government of India. These currency notes are legal tender as provided in The Coinage Act, 2011. The existing currency notes in this denomination in circulation will also continue to be legal tender."

The colour of the new one-rupee currency note will be predominantly pink-green on obverse and reverse, in combination with others. It will have an Ashoka Pillar in the window and a hidden numeral 1 in the centre. The reverse design will include the picture of 'Sagar Samrat' — the oil exploration platform and with the authentic rendering of the value in fifteen Indian languages and the year figure shown in the centre-bottom in international number.

Central banking sources said that low-value currency notes were replaced with coins because printing cost of these notes was higher than the value of the notes. Although minting coins is still more expensive, coins can last hundreds of years.

Source: Times of India

[cap493]

rbi press release

[Bimat]

Thank you for posting the official press release!

In my opinion, it's a foolish decision. Doesn't make any sense at all. Just wastage of taxpayers' money!

Aditya

[Pabitra]

Counter intuitive shift of note-coin boundary.
Defies logic, common sense and financial wisdom.

[Figleaf]

It can be explained by the different perceptions of RBI and the responsible ministry (finance?) The ministry sees complaints about lack of small change and wants to do something about it. RBI thinks it's all nonsense. They may even have made twisted statements about their capacity to produce 1 rupee coins (likely to be loss-makers). This is a bureaucratic compromise. As usual with such compromises, it solves nothing and satisfies nobody.

Peter